Planned cuts to ISA allowances will not go-ahead – Daily Business

The popular savings product has been left intact

The Chancellor has reversed his predecessor Rachel Reeves’ plan to cut the Cash ISA allowance from £20,000 to £12,000 for those under 60.

The proposals had been widely condemned for adding complexity to an already complicated ISA landscape without any evidence they would encourage more people to invest for the long-term.

Paul Riseborough, a partner in KPMG UK’s financial services consulting practice, comments: “Retaining the £20,000 cash ISA allowance will be welcome news for savers and lenders, particularly smaller building societies that rely heavily on cash deposits to fund mortgage lending.

“Changing the cash ISA allowance was never likely turn the UK into a nation of investors – 87% of cash ISA holders confirmed they wouldn’t switch to stocks and shares regardless of the lower cash limit.

“Whilst today’s announcement also includes new ISAs aimed at first time buyers and potential investors, the constant changes to ISA rules risks detracting from one of the product’s main benefits to consumers – its simplicity.”

However, Michael Healy, CEO of IG Consumer, said the Chancellor has “squandered a golden opportunity to help British households build long-term wealth and get more money flowing into the businesses that drive our economy.”

He added: “At a time when Britain desperately needs growth, protecting tax incentives that encourage people to sit on cash rather than invest is a deeply misguided decision.

“Cash ISA subscriptions surged by £26.1 billion last year, more than four times the increase in Stocks & Shares ISAs, yet the Chancellor has chosen to reinforce the very savings culture that is holding Britain back.

“Worse still, IG modelling suggests phasing out Cash ISAs for new contributions could generate up to £610 million in additional annual tax revenue by 2032-33, without touching existing savings.

“This Budget should have been about making Britain’s money work harder for its people and its economy instead of  defending a tax break that most savers don’t need.

“The Chancellor should have gone further by phasing out Cash ISAs for new contributions and redirecting those incentives towards helping households invest, build financial security and share in Britain’s future growth.”